What a change in government means for local economic development in the UK

First published on the website of our podcast LED Confidential.

In LEDC’s post-election special episode David and Mike discuss the Labour landslide and its significant implications for local economic development and placemaking. This guide distils the key themes for professionals in the sector and things to look out for in Labour’s first set-piece policy event as the governing party – the King's Speech on 17 July.

Understanding the new political context

A landslide victory for the Labour Party sets the stage for at least five years of UK-level governance. Labour’s manifesto going into the election focused heavily on reform of LED policy areas like housing, industrial strategy, infrastructure development, and skills. Early official statements confirm intentions for major changes in policy frameworks, funding mechanisms, and governance.

This new political landscape presents both challenges and opportunities for local economic development professionals. By understanding the new government's priorities and preparing for the known changes coming down the track - especially in funding mechanisms and strategic planning responsibilities - local leaders can effectively navigate this transition and drive positive outcomes for their communities. Conducting thorough reviews of local strengths, opportunities, and key projects that align with national priorities should be viewed as urgent business.

Leadership teams should familiarise themselves with the new personnel in national roles affecting local economic development. Where there are new local MPs or even returned MPs, it is important to bring them up-to-speed with how your priority agendas can contribute nationally. Monitor early policy announcements and major speeches - the early announcements of the new Chancellor of the Exchequer, Rachel Reeves, have focused heavily on economic development themes like housing and industrial development. The meetings of the PM and Deputy PM with Directly Elected Mayors sets the tone for the character of England’s next chapters of its devolution journey.

Five ‘first 100-day’ priorities for local and regional economic development leadership teams in England, and the devolved nations

1. Review your Combined Authority/sub-regional and local economic strategies. Ensure their evidence-base is current. Establish what will be needed to refresh them to address national economic and industrial priorities and future Local Growth Plan requirements.

2. Identify major projects that are unequivocally of national significance and likely to be Government priorities. Update their business cases and make them as investment-ready as possible – including determining options for addressing barriers to their delivery.

3. For priority regional and local interventions that might not be on a national priority short-list, consider options for progressing them. Build preferred options into policy negotiations with Government on the next stages of devolution.

4. Reaffirm your approaches to green/blue and inclusive growth – and particularly how your policies will deliver benefits for left-behind communities and disadvantaged groups.

5. Identify development finance options for delivering national, regional and local growth – including your ask of National Wealth Fund, other public investment, and your areas’ ability to attract local and global private capital and revenue funding.

Planning reforms and institutional changes

Central government's role

Expect a more top-down approach to planning and development control, with less formal consultation and faster implementation of policies aided by more direct intervention by Whitehall. More permissions related to industrial developments in priority sectors will be called in by central government which will increase its institutional capacity to fast-track proposals. Its stated intention is to streamline processes for projects like data centres, factories, and energy infrastructure.

Traditionally the call-in option has required developers to navigate a trade-off between certainty and speed, with national-level decisions taking longer, but more likely to result in a positive outcome.  Expect the government to set targets for both increased speed and certainty in processing called-in applications.

Strategic planning

Labour’s manifesto commits it to reintroduce mandatory strategic planning – something not seen in England since the days of the Regional Spatial Strategies, which were scrapped by the incoming coalition government in 2010.  While the details are still to emerge (at the time of writing), local areas should prepare for statutory requirements to have local plans in place within this parliament. It will involve some combination of new sub-regional spatial strategies led by Combined Authorities, and local development plans compiled by District and Unitary authorities.

Local leadership teams should revisit and rebuild investment pipelines where these are not already advanced. And they should identify and prioritise projects that meet the criteria for national significance (as these become known) and are likely to benefit from fast-tracked consideration of land-use proposals.

Balancing national and local priorities

The relationships between central, local, and devolved national government are set for major change, with a new Council of Nations and Regions. New ministers in the UK government have talked about ‘more direction but less control’ from a Whitehall acting to implement its new industrial strategy. We do know that in England this will operate through planning and development control, with an extension of call-in powers to cover a greater range of use cases, offset by statutory local and sub-regional plans with their priorities and inclusion goals. It’s less clear how local alignment with national priorities can be assured, beyond access to funding opportunities. Will new sub-regional plans require ministerial endorsement, as with the old, pre-2010 regional plans? Watch this space!

While addressing spatial inequalities in wealth remains a driver of policy action – especially in the stated objective to devolve more power to communities from Whitehall - ‘levelling-up’ can now be considered a hex word in local-national engagement.  The term has been officially dropped from the policy lexicon and the name of the local government department – which regains its old acronym of MHCLG, or the Ministry of Housing, Communities & Local Government.

Financial mechanisms and private investment

The National Wealth Fund (NWF) and other new financial mechanisms will emphasise leveraging private investment. The NWF, which brings together the UK Infrastructure Bank and British Business Bank, is aiming to achieve a 3:1 ratio of private to public funds.

But…areas with high land values and dynamic markets will find it easier to attract private investment, which is one of the reasons why match funding requirements were left out of the design of the UK Shared Prosperity Fund. Left-behind places may struggle with private leverage requirements and need creative approaches to meet these challenges, exploring financing solutions and partnerships to bridge funding gaps.